ROSEMONT, Ill. -- "Well folks, we did it."
David Nelson, president of Study Group 900, Seattle, is referring to the United States' economic recovery after the Great Recession. As of June 2014, the country finally recovered all of the jobs it lost during the downturn. But it took more than six years to do it, which judging by previous recoveries, is the new norm.
As Nelson, presenting at the NACS State of the Industry Summit, explained to convenience-store industry attendees, the economy is finally in a good place. He pointed to an average job growth of 269,000 jobs per month over the past year--the best run since the mid-1990s--as one piece of evidence.
The unemployment rate has fallen to 5.5%, evident of a fully employed economy, and it is expected to dip to 4.7% in 2016. And even based on broader measures of unemployment, he is "very, very encouraged" by the declining trend.
Meanwhile, average hourly wages have risen 36% since 2000, although the annual growth rate has slowed over the past years, and is currently at 2.1% year over year.
Falling unemployment has pressured wages upward, as well as increasing turnover because workers have more options. This in turn has triggered a wave of corporate giants--Walmart, McDonald's--to announce increases in their corporate minimum wage, with a steady stream of state minimum wage increases adding a tailwind.
This creates a real challenge for convenience-store operators, Nelson said, and a need to create a plan to deal with a much tighter labor market. Consider that there is one less applicant per retail position in 2015 than in 2014.
"What kind of culture are you creating to make people want to work at your organization?" he said.
Also putting more money in consumers' pockets is the drop in oil prices--down almost 60% over the past year--and the resulting decline in gasoline prices. Nelson believes oil prices will remain depressed for a much longer period than any time in the recent past, and noted that there will be winners and losers.
The winners? Consumers, of course, who are enjoying the equivalent of a $750 tax cut per household. Also, retailers, whose customers now have more disposable income, and the agricultural and transportation industries, whose fuel costs have declined. Meanwhile, consumers have begun buying larger, less fuel-efficient vehicles, which could alleviate the gasoline demand slump that has settled over the business since the recession.
The losers: the U.S. oil industry, which has had to cut its capital spending, active rig count and workforce, as well as the states and industries that rely on oil revenue.
Other macro trends shaping the revitalized economy include the strong U.S. dollar. While it buys Americans more goods for their money from abroad, it makes American goods more expensive and less competitive. Also, the growth rate for the gross domestic product has averaged 2.3%, a slower pace than in previous decades. And the economy is currently in a soft spot, with weakness in the goods sector.
Inflation, which remains low, will slowly tick up as the Federal Reserve seeks to ease it up to healthier levels. And the Fed is expected to finally raise interest rates--anticipated sometime during the third quarter. Expect between a three-quarters and 1% bump in interest rates between now and 2016.
"Consumers are the bright spot of the economy," said Nelson. Their spending is up, which is "very, very bullish for you and your business, and very bullish for the economy."
In particular, food and beverages, foodservice and energy goods are industry-relevant areas that are tracking among the top in spending growth.
And the housing industry, while it has not fully recovered, is on the mend--a good sign for the convenience-store industry, which serves the construction class of trade. Nelson pointed to a steady increase in housing starts over the past few years as yet "another honestly bullish sign for the economy."
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